Social Policy in Ontario

Tim Hudak’s Million Jobs Plan is easy to achieve

Posted on June 3, 2014 in Debates

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NationalPost.com – FP Comment
June 2, 2014.   Philip Cross

It is not contradictory to cut public service jobs to stoke total job growth

Lost in the controversy surrounding the accounting details of the Ontario Conservatives’ Million Jobs Plan is the banality of its forecast, if not its ambitions.

Adding a million jobs over eight years represents a total gain of 14.5% from the current employment level of 6.9 million. This translates into annual average growth of 1.8% a year. It is a mark of how resigned Ontarians have become to sub-par growth that increases of this magnitude are regarded by some as preposterous or outlandish. In the 1990s, one million more jobs over an eight year period was the norm, regularly matched or exceeded year after year. And those increases were harder to achieve, since the economy was smaller, which meant adding one million jobs required a 20% increase.

More importantly, the nearby graph shows it is not contradictory to cut public service jobs to stoke total job growth. Those million jobs created in the 1990s occurred despite larger cutbacks in the public sector than is currently being proposed. Public sector jobs in Ontario fell by 88,000 between 1994 and 1998, a drop of 9%. By comparison, Hudak’s proposal to eliminate 100,000 positions represents only 7.7% of today’s bloated public service.

However, recently employment growth in Ontario has slowed substantially, settling at a half million in the last eight years. So the Million Jobs Plan takes a half million jobs as its baseline growth of jobs Ontario will add no matter who is in power over the next eight years. It then projects that better economic policies will return Ontario to the path of one million job growth it enjoyed before the Liberal government committed itself to large deficits, expensive “green” energy policies and endless meddling in business affairs.

Actually, one could criticize the Plan for being overly-cautious. The business cycle of alternating periods of stronger and weaker economic growth interacts with public policies in predictable and self-limiting ways. Long periods of strong economic growth, like the 1960s and 1990s, leads to a hubris among governments that growth is automatic and self-sustaining, and the policy pendulum swings from encouraging economic growth to indulging questions of social justice or environmental activism, which eventually extinguishes growth.

After the initial policy response of squabbling over income distribution rather than income creation, the absence of growth over a prolonged period finally leads to the election of a champion of policies which push the pendulum back to a pro-growth stance (as occurred under Reagan and Thatcher in the 1980s and Clinton and Chretien in the 1990s). In both the 1980s and 1990s, economic growth surprised on the upside, despite cuts to the public sector. After seven years of lagging Canadian GDP growth, and two years of outright decline in real per capita incomes, hopefully Ontario has hit bottom and realizes the need to adopt pro-growth policies.

With the U.S. economy showing signs of coming out of its extended hangover from the financial crisis and a lower dollar that favours Ontario’s exporters, the key element missing from turning over Ontario’s economic engine is business investment. The Million Jobs Plan to rein-in government spending and encourage business investment represents the best chance to revive job growth in Ontario. Cuts to the public sector are not a threat to jobs, but a tonic for reviving economy-wide growth.

Philip Cross is the former Chief Economic Analyst at Statistics Canada.

< http://business.financialpost.com/2014/06/02/tim-hudaks-million-jobs-plan-is-easy-to-achieve/ >

Tags: budget, economy, ideology, privatization, standard of living, tax

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